This invention relates to the field of Image Cash Letters (ICLs), and more particularly to a method and apparatus for performing automated tracking and reporting on the processing and posting of received ICLs to their named payee accounts.
The Check Clearing for the 21st Century Act, Public Law 108-100 108th Congress (“Check 21 Act”) was enacted into law on Oct. 28, 2003, and took effect a year later on Oct. 28, 2004. This is an initiative by Congress to revise the rules governing the exchange of checks between banks by enabling an electronic check collection system for the country. As known, checks are negotiable instruments in the form of draft drawn on a checking account, and are payable on demand. Check collection, or “check clearing”, facilitates payment by moving checks from the banks where they are deposited (Receiving Banks) to the bank on whose accounts they are drawn (Paying Bank), and then moving the payment in the opposite direction. This credits accounts at the Receiving Bank and debits accounts at the Paying Bank. The Federal Reserve participates in check clearing through its nationwide facilities, but many checks are cleared by private sector arrangement.
The Check21 Act allows banks (defined by the Check 21 Act as any financial institution identified under section 19(b)(1)(A) of the Federal Reserve Act) to create a new negotiable instrument called a “substitute check”. The substitute check is a digitized image of the original check, which may be electronically transmitted and processed. It includes front and back images of the original check, together with the check-writer's bank routing number, account number, and the dollar amount of the check in a magnetic ink character recognition (MICR) line along the bottom. Under the Check 21 Act these digitized images are electronically exchanged between banks using an Accredited Standards Committee (ASC) X9.37 protocol and file format1 adopted by the Federal Reserve Banks. 1 “Specification for Electronic Exchange of Check and Image Data”
The substitute checks are included in the X9.37 file as a Type 25 “Check Detail Record” (or for convenience here as the acronym “CDR”). The front and back images of the original check are captured as Type 52 records, which include the TIFF (tagged image file format) images, and are included in the X9.37 file along with their corresponding type Type 25 CDR. Within the X9.37 file the CDRs are organized in batches, one or more CDRs per batch, and the batches are organized into one or more Image Cash Letters (“ICL”s) within the X9.37 file. The Image Cash Letter is considered the electronic equivalent of the inter-bank paper document transmittal letter that accompanies cash items sent between banks. For purposes of this application the terms X9.37 file and ICL file are considered equivalent, and will here be used here interchangeably. In addition to the individual CDR MICR information they contain, each X9.37 file or ICL file also presents the ICL cash totals as well as the sum amounts drawn on the different CDR endpoint accounts, which facilitates reconciling, if necessary.
While the Check 21 Act doesn't require banks to change the way they collect and process paper checks, it makes CDRs an option so that it indirectly requires banks and their customers to accept CDRs when requested by another bank or other financial institution choosing that option. This means that a paying bank (the bank on which the check is drawn) must accept and pay the demand based on the electronic transmission of check payment information. If the paying bank requires paper documentation, the collecting bank (any bank handling a check for collection, except the paying bank) can still perform and benefit from electronic delivery but must also then provide paper copies of the CDRs, which are known as Image Replacement Documents, or “IRDs” Similarly, bank customers who earlier received copies of their cancelled checks now receives IRDs of the CDRs that their bank has received.
Since the purpose of the Check 21 Act is to improve the speed and efficiency of the check clearing process, it does not require a contract2 between banks (e.g. paying bank, collecting bank, depository bank, and returning banks) and bank customers, or 3rd persons and non-customer entities that present substitute checks for payment or deposit. The Act instead requires banks that transfer, present, or return substitute checks and receive consideration for performing this service, must warrant their accuracy.3 2 Check 21 Act; Section 4 GENERAL PROVISIONS GOVERNING SUBSTITUTE CHECKS; (a) NO AGREEMENT REQUIRED3 SEC. 5. SUBSTITUTE CHECK WARRANTIES A bank that transfers, presents, or returns a substitute check and receives consideration for the check warrants, as a matter of law, to the transferee, any subsequent collecting or returning bank, the depository bank, the drawee, the drawer, the payee, the depositor, and any endorser (regardless of whether the warrantee receives the substitute check or another paper or electronic form of the substitute check or original check) that: (1) the substitute check meets all the requirements for legal equivalence under section 4(b); and (2) no depository bank, drawee, drawer, or endorser will receive presentment or return of the substitute check, the original check, or a copy or other paper or electronic version of the substitute check or original check such that the bank, drawee, drawer, or endorser will be asked to make a payment based on a check that the bank, drawee, drawer, or endorser has already paid.
The received ICLs include CDRs which are to be forwarded as well as CDRs that are being returned for processing either by the receiving bank or forwarded to another paying bank. Initial processing then requires: (1) verifying the X9.37 format and contents; (2) identifying all 3rd party receiving banks for CDRs in the file; (3) aggregating those 3rd party CDRs by the identified receiving bank(s) into one or more outgoing ICLs; and (4) forwarding each outgoing ICL to its identified receiving bank.
The banks each receive and transmit the X9.37 files though a secure interface, which includes input channels for receiving incoming X9.37 files forwarded by others and output channels for transmitting the X9.37 files that it creates. For each received or created X9.37 electronic transmittal a tracking record is created which follows the processing of each included ICL through its multiple electronic check processing points; each of which performs specific business requirement processing. These processing steps vary based on the CDR and the requirements of the processing organization. Logical events are defined that are based on the outputs from each check processing point within the processing path. The tracking record is updated through a matching process that is based on the output data elements that are available from each processing step. These processing points include the input and output channels, the ICL processing system, an image exchange processing system, a check processing system, a reformatter system, and a warehousing system.
This is a continuous process that runs on a 24 hour basis. Cycle times are computed for each processing system as the ICL file progresses from receipt to posting. Various reports are created on both a detail and summary basis, including completed as well as exceptions. Alerts are created to indicate ICL files that have taken longer than expected in any given validation processing step. With the volume of ICL files processed and with the ICL tracking record accompanying the cash letter transmittal it is possible to have instances in which the tracking record alone, or both the tracking record and the ICL itself become lost and unaccounted for until some later time in which a follow-up demand is made. There is a need, therefore, to have a monitoring system which is easily implemented, that does not modify or alter the existing verification procedures of the overall validation process, and which is capable of providing real time notice of process status.